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TUTOR SALIBA CORPORATION v. EVEREST NATIONAL INSURANCE COMPANY et al

ATTENTION: It is possible that this information may no longer be current and therefore may be inaccurate. The index contains both open and closed cases and is not a complete list of cases in which an ACE Insurance Group company is involved. This information is provided to give interested persons an idea of the issues disputed in the indexed cases. For a full understanding of a case, one should read the rest of the court file, including the response. For the most up-to-date and complete information on a case, visit www.pacer.gov or contact the clerk of the relevant court.

Case Number: 
2:15-cv-01093 Search Pacer
ACE Group party(s): 
Opposing Party: 
Tutor Saliba Corporation
Court Type: 
Federal
US District Court: 
Central District of California
Date Filed: 
Feb 13 2015

Tutor-Saliba Corporation, by and through its counsel, complains and alleges as follows:

GENERAL ALLEGATIONS
1. Plaintiff Tutor-Saliba Corporation (“Tutor-Saliba”) is and was at all times relevant
hereto a California corporation, a licensed California contractor with its principal place of business in
Los Angeles County, California, and doing business in Los Angeles County, California, and a licensed
Nevada contractor doing business in Clark County, Nevada,
2. Tutor-Saliba is informed and believes and thereupon alleges that Defendant Everest
National Insurance Company ("Everest”), is and was at all times relevant hereto a Delaware
corporation doing business as an insurance carrier in the State of California, with offices in the State
of California and issuing and delivering insurance policies in the State of California, and doing
business in the State of Nevada.
3. Tutor-Saliba is informed and believes and thereupon alleges that Defendant ACE
American Insurance Company (“ACE”) is and was at all times relevant hereto a Pennsylvania
corporation, doing business as an insurance carrier in the State of California with offices in the State
of California and issuing and delivering insurance policies in the State of California, and doing
business in the State of Nevada,
4. Tutor-Saliba does not know the true names of individuals, corporations, partnerships
and entities sued and identified in fictitious names as DOES I through 50. Tutor-Saliba alleges that
such defendants are responsible for damages suffered by Tutor-Saliba as fully discussed under the
claims for relief set forth below, Tutor-Saliba will request leave of this Court to amend this
Complaint to show the true names and capacities of each such fictitious defendant(s) when Tutor-
Saliba discovers such information,

UNDERLYING LITIGATION
5, The subject of the underlying litigation is the construction of a 50-story timeshare
tower resort with swimming pool and convention center, attached to the Planet Hollywood / Miracle
Mile Mall complex on the strip in Las Vegas, Nevada (“Project”). The Florida timeshare company
that developed the Project, Westgate Resorts, Ltd. (“Resorts”), managed the development of the
Project through a single purpose limited liability company known as Westgate Planet Hollywood Las
Vegas, LLC (“WPH"). WPH and Resorts are collectively referred to herein as “Westgate”.
6, In or about the fall of 2006, the Chief operating officer of Westgate contacted the
president of Tutor-Saliba, whose office is located in Los Angeles County, California, to request that
Tutor-Saliba consider a proposal to enter into an agreement as the General Contractor for construction
of the Project.
7, In or about February of 2007, Tutor-Saliba entered into a contract to construct the
Project as the General Contractor (“Contract”). Pursuant to the Contract, Westgate promised to
maintain insurance policies for the Project under an Owner Controlled Insurance Program (“OCIP”)
for the subject project. (Attached hereto as Exhibit 1 is a copy of the Contract with Attachment K to
the Contract - the OCIP Manual / Certificate of Insurance)
8. The various insurance coverages provided for the Project under the OCIP include a
primary commercial general liability policy and three layers of excess liability policies, as follows:
a. The primary commercial general liability policy, which provides $2 million of
coverage per incident and a $4 million aggregate policy limit, was issued by ACE,
bearing policy number HDO-G16800880 (“ACE Policy”). (Attached hereto as
Exhibit 2 is a copy of the ACE Policy)
b. The first excess layer of liability coverage, which provides the first $10 million in
excess liability coverage, was issued by Everest, bearing policy number 71R 1000005-
061 (“Everest Policy”). (Attached hereto as Exhibit 3 is a copy of the Everest Policy)
c. The second excess layer of coverage, which provides the next $15 million in excess
liability coverage, was underwritten through certain underwriters at Lloyd’s of
London, bearing policy number B0595/X0027590V (“Lloyd’s Policy”),
d. The third and final layer, which provides the last $75 million of excess liability
coverage, was issued by Lexington Insurance Company, bearing policy number
4101224 (“Lexington Policy”). In or about 2013, the Lexington Policy was replaced
by three $25 million excess policies.
9. Pursuant to the terms of the Contract and OCIP Manual, and as set forth in the
Certificate of Insurance, Tutor-Saliba and its subcontractors became named insureds under the aboveeferenced
primary and excess liability insurance policies that provide liability protection through the
)CIP for the Project. These OCIP liability policies were issued with dates of coverage from October
006 through substantial completion of the Project in December 2009, plus an additional 10-year tail
overage for completed operations.
10. After the completion of the construction of the Project, WPH refused to pay the final
alance of monies due and owing under the Contract to Tutor-Saliba.
11. On or about May 10, 2010, Tutor-Saliba filed an action in Clark County Superior Court
gainst WPH, to recover monies owed under the Contract. (“Underlying Action”) The lawsuit
included, without limitation, causes of action for breach of contract and foreclosure ofmechanic’s lien
recorded by Tutor-Saliba against the Project. Tutor-Saliba subsequently filed a First Amended
Complaint to include surety defendants after Westgate posted a mechanic’s lien release bond. After
Westgate allowed the third excess layer of liability insurance Lexington Policy to lapse, Tutor-Saliba
filed a Second Amended Complaint to which added Resorts as a party, and allegations under causes
of action for breach of contract and promissory estoppel regarding the obligations of Westgate and
Resorts to maintain the insurance policies in the OCIP.
12. On or about May 27,2010, WPH filed a Counterclaim to the Tutor-Saliba Complaint,
which included, without limitation, causes of action for breach of contract and negligence, in which
WPH alleged, among other things, that Tutor-Perini was negligent in failing to meet its duty to
construct the Project with reasonable care, in a workmanlike manner, and in accordance with
applicable laws, regulations, ordinances and standards of care; and to use appropriate skill and
udgment in carrying out its work. WPH further alleged that this failure resulted in defective and nonjonforming
work at the Project.
13. On or about November 17, 2010, WPH served a defect list and cost of repair report
'or the claims of construction defects on the Project. The list of construction defects included claims
'or excessive concrete cracking and delamination of coating in the swimming pool deck, excessive
ieterioration of lobby tile grout, two minor cracks in concrete block (CMU) walls, uneven concrete
loors in the convention center and some meeting rooms, and a few other minor claims that were
diminated from the litigation before trial. The initial total cost of repair for all claims was
13,076,504.
14. On or about March 15, 2012, WPH served an amended defect list and cost of repair
eport for the claims of construction defects on the Project, which made minor adjustments to the cost
if repair, which totaled $ 3,610,785.
15. Prior to trial, certain construction defect claims in the amended defect list were
liminated from the litigation, either by motion for partial summary judgment or dismissal by WPH.
16. Tutor-Saliba is informed and believes and thereupon alleges that at the final mandatory
ettlement conference in September 2012, where a representative of Everest was present with
authority to settle the case, the OCIP liability insurance carriers were prepared to offer as much as
$2.5 million to settle the Construction Defect claims prior to trial, The parties were unable to
negotiate a settlement of their respective claims at the final mandatory settlement conference.
17, From October 8,2012 through February 8,2013, a bench trial was conducted on the
Tutor-Saliba contract claims, and the WPH contract and construction defect counterclaims. The trial
Court’s rulings were set forth in the initial Findings of Fact and Conclusions of Law dated March 23,
2013 (“FFCL”). Following numerous post-trial motions, a Second Amended FFCL was signed by the
Court on March 17, 2014 (“Second Amended FFCL”), after which an Amended Judgment was
entered by the Court on March 20,2014 (“Amended Judgment”), (Attached hereto as Exhibit 4 is a
copy of the Second Amended FFCL; and attached hereto as Exhibit 5 is a copy of the Amended
Judgment)
18. As set forth in the FFCL, and unchanged in the Second Amended FFCL, the Court
found in favor of Westgate on four of its Construction Defect claims, with damages awarded in the
amount of $2,584,487, on the following claims;
a. Excessive Concrete Cracks and Delamination of Pool Deck Coating $2,148,353
b. Deteriorating Grout and Cracked Tile in Lobby $ 199,385
c. Cracks in Two Concrete Masonry (CMU) Walls $ 56,206
d. Uneven Concrete Floors $ 180.543
Total Construction Defect Claims Award $2^84,487
19, Tutor-Saliba alleges that the evidence presented at trial establishes that three of those
four Construction Defect Claims are covered by the ACE Policy and the Everest Policy (“Covered
Claims”), The Covered Claims are as follows:
a. Excessive Concrete Cracks and Delamination of Pool Deck Coating $2,148(353
b. Deteriorating Grout and Cracked Tile in Lobby $ 199(385
c. Cracks in Two Concrete Masonry (CMU) Walls $ 56.206
Total Award on the Covered Claims $2,403,944
20. The total principal amount of the award and judgment entered against Tutor-Saliba and
in favor of Westgate for the three Covered Claims is $2,403,944.
21. Tutor-Saliba alleges that these Covered Claims are for cost of repair of property
damage, as property damage is defined by the ACE Policy and Everest Policy, that arose out of and
resulted from occurrences that are covered under the ACE Policy and Everest Policy.
22. In the Amended Judgment, the Court awarded WPH prejudgment interest on the
Construction Defect claims in the amount of $515,231,64, which increased the total award and
judgment amount from $2,403,944 to $3, 099,719 as of March 18, 2014. The Court also awarded
post-judgment interest which continues to accrue on that award of $3,099,719 at an annual rate of
5.25%, or $445.85 per day,
23. ThroughMarch 18,2014,pre-judgmentinterestintheamountof$479,241 hadaccrued
on the award of $2,403,944 on the three Covered Claims, for a total judgment on Covered Claims in
the amount of $2,883,185 through March 18, 2014.
24. In addition, from March 19,2014, post-judgment interest continues to accrue at a daily
rate of $414.64 on the judgment for those Covered Claims, for total of post-judgment interest to date,
on the Covered Claims in the amount of $121,489.
25. As of the filing of this action, the total amount ofthe Judgment against Tutor-Saliba
and in favor of WPH for the Covered Claims including principal, prejudgment interest and post
judgment interest, exceeds $3 million.
26. Tutor-Saliba gave notice of appeal of the Judgment in favor of Westgate on its
Construction Defect Claims, and Tutor-Saliba was ordered to post a bond in the amount of
$3,475,189.50 in connection with its appeal. Tutor-Saliba posted the required supersedeas bond at a
yearly premium cost of $ 26,411. Security for the bond posted by Tutor-Saliba is based upon the
creditworthiness of Tutor-Saliba and other affiliated companies, some of which, like Tutor-Saliba, are
California business entities with their principal place of business in California,

RELEVANT POLICIES
27. Given the amount of the Judgment in favor of WPH on the Construction Defect
Claims, Tutor-Saliba alleges that the OCIP policies relevant to this action are the primary liability
insurance policy issued by ACE - the ACE Policy - and the insurance policy providing the first layer
of excess liability coverage issued by Everest - the Everest Policy.

TENDERS AND RESPONSES
28. In 2010, Tutor-Saliba gave timely and adequate notice by tendering the Construction
Defect Claims to all of the insurance carriers that issued the OCIP commercial general liability
policies including, without limitation, ACE and Everest, for defense and indemnity against the
Construction Defect Claims under the OCIP liability insurance policies.
29. Under a reservation of rights, ACE paid the attorney’s fees and costs incurred through
insurance defense counsel who was retained by ACE on behalf Tutor-Saliba, to defend Tutor-Saliba
against the Construction Defect Claims by WPH. Tutor-Saliba incurred additional attorney’s fees and
costs through co-counsel in defending against the Construction Defect Claims, which additional fees
and costs were not paid by ACE, but were paid directly by Tutor-Saliba.
30. In 2011 Everest served a letter to Tutor-Saliba asserting a reservation of its rights to
deny coverage under the Everest Policy, based on the reservation of rights asserted by ACE under the
ACE Policy.
31. Although ACE initially defended under a reservation of rights, Tutor-Saliba is
informed and believes and thereupon alleges that ACE has withdrawn its reservation of rights and has
accepted coverage, based on its tender of policy limits of $2 million. ACE continues to pay attorney’s
fees and costs incurred through its retained insurance defense counsel for the appeal on part of the
judgment against Tutor-Saliba, in connection with the Covered Claim pertaining to the lobby tile.
32. In numerous correspondence through 2013 and 2014, Tutor-Saliba fully cooperated
with Everest in its investigation of coverage, by providing requested trial exhibits and transcripts of
trial testimony to counsel for Everest.
33. On or about February 9,2014, by and through a letter from legal counsel for Everest to
legal counsel for Tutor-Saliba, Everest wrongfully and unequivocally denied coverage for the Covered
Claims, and Everest refused to pay the balance of the Judgment on the Covered Claims after
exhaustion of the ACE policy limit of $2 million.
34. As a direct and proximate result of Everest’s refusal to acknowledge and accept
coverage and meet its obligations under the Everest Policy, Tutor-Saliba has incurred damages in
excess of $3 million including, but not limited to, the principal amount of the award in the
Construction Defect Claims, prejudgment interest and post-judgment interest on that award that
continues to accrue on a daily basis, the annual premium cost of the bond posted on appeal, and
attorney’s fees and costs, not all of which have been paid by ACE.

FIRST CAUSE OF ACTION
(Breach of Insurance Contract Against Everest and DOES 1-10)
35. Tutor-Saliba hereby repeats, alleges and incorporates each and every allegation set
forth in paragraphs 1-34 as if set forth at length and in full.
36. Tutor-Saliba has satisfied all contractual conditions in connection with the OCIP
Manual, the ACE Policy and the Everest Policy, which afford liability protection to Tutor-Saliba as a
named insured; and thus Tutor-Saliba is entitled to receive full benefits of coverage. Those benefits
include, but are not limited to: complete defense of the Construction Defect Claims and related
allegations and causes of action alleged in the Underlying Action; fees and costs incurred on appeal of
the award on the Construction Defect Claims; and full payment of the judgment amount awarded on
the Covered Claims, plus prejudgment interest and post-judgment interest on those claims.
37. Defendants, and each of them, owed an indivisible duty to provide a complete defense
and indemnification to Tutor-Saliba against the Construction Defect Claims notwithstanding any
agreement by any other insurer to pay any such expenses, costs and liabilities. Tutor-Saliba alleges
hat each Defendant is legally responsible for the totality of the cost of defense and payment on any
award on the Covered Claims, up to the limits of the respective policies they issued as part of the
DCIP, and subject to their standing as primary and excess insurance carriers under the OCIP.
38. Everest and DOES 1-10, as the insurer of the first layer of excess liability coverage
hrough the Everest Policy, have breached their contractual obligations to Tutor-Saliba by failing and
•efusing to accept coverage to indemnify Tutor-Saliba and pay for the remaining balance of the
udgment awarded in connection with the Covered Claims including principal and interest after
;xhaustion of the ACE policy limits.
39. As a direct and proximate result of the aforementioned breaches, Tutor-Saliba has
suffered damage in an amount according to proof at trial, which is in excess of this Court’s
jurisdictional limit. Because interest is accruing, damages continue to be incurred by Tutor-Saliba,
which will impact the calculation of total damages.

SECOND CAUSE OF ACTION
(Breach of the Covenant of Good Faith and Fair Dealing Against Everest and DOES 1-10)
40. Tutor-Saliba hereby repeats, alleges and incorporates each and every allegation set
forth in paragraphs 1 -39 as if set forth at length and in full.
41. The insurance policies issued as part of the OCIP including, without limitation, the
subject liability insurance policies - the ACE Policy and the Everest Policy - contain an implied
covenant of good faith and fair dealing, which obligates the Defendants, and each of them, to act in
good faith with respect to all aspects of handling any claim against their insureds, and to refrain from
taking any action that interferes with their insured’s rights to enjoy the full benefits of coverage.
42. Everest and DOES 1-10, and each of them, have breached their duty of good faith and
fair dealing owed to Tutor-Saliba, as follows:
a. Unreasonably, and without proper cause, refusing to acknowledge and accept coverage
of the Covered Claims under the Everest Policy;
b. Unreasonably, and without proper cause, failing and refusing to indemnify Tutor-Saliba
and pay the remaining balance of the judgment amount awarded against Tutor-Saliba
and in favor of WPH on the Covered Claims, to the extent that judgment amount
exceeds the balance of the policy limits that are not exhausted on the ACE Policy.
43. Asa direct and proximate result of the unreasonable and bad faith conduct of Everest
and DOES 1-10, and each of them, Tutor-Saliba has suffered and will continue to suffer damages in an
amount according to proof at trial, which is in excess of this Court’s jurisdictional limit. Because
interest is accruing, damages continue to be incurred by Tutor-Saliba, which will impact the
calculation of total damages .
44. Tutor-Saliba is informed and believes and thereupon alleges that Everest and DOES 1 -
10, and each of them, intentionally engaged in a course of conduct which was intended or expected to
oppress Tutor-Saliba in conscious disregard of the rights of Tutor-Saliba to receive benefits due Tutor-
Saliba under the Everest Policy. Tutor-Saliba is informed and believes that these acts were willful and
oppressive, and were done with the knowledge, approval and ratification of Everest and DOES 1-10. In
order to deter such conduct by Everest and DOES 1-10 in the future, and to prevent repetition of such
conduct as a practice, Tutor-Saliba prays for exemplary and punitive damages against Everest and
DOES 1-10.

THIRD CAUSE OF ACTION
(Declaratory Relief Against Everest, ACE and DOES 1-50)
45. Tutor-Saliba hereby repeats, alleges and incorporates each and every allegation set forth
in paragraphs 1-44 as if set forth at length and in full.
46. An actual, ripe and justiciable controversy exists regarding Defendants’ contractual duty
to perform under the insurance policies they issued in connection with the OCIP for the Project, and
Tutor-Saliva’s contractual right to defense and indemnity under those OCIP insurance policies, in
connection with the Covered Claims.
47. A declaratory judgment will serve a useful purpose in clarifying and settling the parties’
rights, status and legal relations, and will terminate and afford relief from uncertainty, insecurity and
controversy giving rise to this action.
48. Based on the terms of the OCIP and the subject insurance policies issued by Defendants,
futor-Saliba respectfully requests ajudicial declaration of the respective rights and obligations ofthe
parties; specifically, that: (1) the liability insurance policies issued by ACE and Everest as part ofthe
OCIP for the Project - the ACE Policy and the Everest Policy - required ACE and Everest to defend
futor-Saliba against the Construction Defect Claims; (2) the ACE Policy and the Everest Policy
required ACE and Everest to indemnify Tutor-Saliba against the Covered Claims by paying the amount
jf any judgment entered on the Covered Claims including all prejudgment and post-judgment interest,
subject to their respective policy limits and positions as primary and excess insurance carriers; (3) that
Everest is in breach of the Everest Policy, in that it has failed to acknowledge and accept coverage for
he Covered Claims and indemnify Tutor-Saliba thereon, which was required as part of Everest’s
jerformance under the Everest Policy; (4) and that Tutor-Saliba is also entitled to recover against
Everest in the amount of damages incurred by Tutor-Saliba in connection with the Covered Claims
ncluding, without limitation, all judgment amounts on the Covered Claims and all pre-judgment and
post-judgment interest thereon, and attorney’s fees and costs, subject to exhaustion of the ACE policy
limits.

WHEREFORE, Tutor-Saliba prays for Judgment against Defendants as follows:
1. For judgment in favor of Tutor-Saliba and against ACE and Everest and DOES 1-50,
and each of them, jointly and severally, subject to their respective policy limits and positions as
primary and excess insurance carriers, for any damages incurred by Tutor-Saliba in the Underlying
Action including, but not limited to, the amount of any liabilities incurred by Tutor-Saliba and
udgments entered against Tutor-Saliba in connection the Covered Claims, in an amount to be proven
it trial, and unpaid attorney’s fees and costs in defending against the Construction Defect Claims;
2. For judgment in favor of Tutor-Saliba and against ACE and Everest and DOES 1 -50,
ind each of them, jointly and severally, for pre-judgment interest and post-judgment interest at the
lighest rate allowed under the applicable contract and law, on any award of damages herein in
jonnection with the Covered Claims;
3. For judgment in favor of Tutor-Saliba and against Everest and DOES 1-10, and each of
hem, jointly and severally, for exemplary and punitive damages;
4. For judgment in favor of Tutor-Saliba and against Everest and DOES 1 -10, and each of
hem, jointly and severally, for Tutor-Saliva’s reasonable attorney's fees and costs of litigation
ncurred by Tutor-Saliba herein;
5. For declaratory judgment of the respective rights and obligations of the parties, and
:ach of them, in connection with the Construction Defect Claims; and specifically that: (1) the liability
nsurance policies issued by ACE and Everest as part of the OCIP for the Project - the ACE Policy
ind the Everest Policy - required ACE and Everest to provide a legal defense to Tutor-Saliba against
he Construction Defect Claims; (2) the ACE Policy and the Everest Policy required ACE and Everest
o indemnify Tutor-Saliba by paying the amount of any judgment entered on the Covered Claims
ncluding all prejudgment and post-judgment interest thereon, subject to their respective policy limits
nd positions as primary and excess insurance carriers; (3) that Everest is in breach of the Everest
’olicy, in that it has failed to acknowledge and accept coverage of the Covered Claims, which was
equired as part of its performance under the Everest Policy; (4) and that Tutor-Saliba is also entitled
to recover against ACE and Everest in the amount of damages incurred by Tutor-Saliba in connection
with the Covered Claims including all judgment amounts on the Covered Claims and all pre-judgment
and post-judgment interest thereon, subject to their respective policy limits and positions as primary
and excess insurance carriers; and
6. For such other and further relief as this Honorable Court deems just and proper,

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.

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